321–330 of 407 posts
Article appears to be conflating big tech companies that print money with AI startups like OpenAI and Anthropic. After the opening paragraphs about the accounting practices of meta, Microsoft, alphabet, etc - which, it should be noted are not “houses of cards” and earn plenty of money - the article quietly transitions to > Experts continue to warn of an AI bubble, noting the enormous and widening gulf between company…
Earlier quoted context omitted.
In many historical societies, religious prohibitions on usury meant the charging of interest of any kind . Jump in a time machine to 1515 and ask Martin Luther, or to 1260 and ask Thomas Aquinas, they'd tell you it's sinful. And in the present age, a fair number of Islamic folk consider interest against their religion's rules. So there's a Halal finance industry where, for example, you can get a "murabahah contract"…
I love when religions have rule lawyers like this. It readily discredits the religion. As if their all powerful god can be fooled by fancy paperwork or legal loopholes.
So I guess in this case if the house burns down and the insurance only pays 50% of the agreed value then the lender only receives 50% of their agreed repayment.
Do they? Is a company with $200 billion annual revenue and earnings (EBITDA) of $100 billion having $420 billion of off-balance-sheet debt really staggering? In many other industries that would be a perfectly normal amount of debt to have. It's only unusual because we are used to tech companies having so much cash on hand they don't know where to put it
Earlier quoted context omitted.
One of the big issues with this is sequence of returns risk. If you retire and rely on your portfolio but the market dives for a year or two right after you leave the workforce, your total portfolio value is screwed because you were selling at a low point.
Which is why you keep 3-5 years of spending money in cash (or a bond ladder if you want to be fancy).
1x is plenty IMO.
Earlier quoted context omitted.
Couldn't it be a problem given the concentration of the S&P in these companies? At this point these companies make up a huge portion of 401k's for a huge chunk of Americans. How would it affect retirees if they dropped 40-50%, likely taking the market with them?
I suggest looking into “EQL”, or better yet, just replicating its index by taking a position in the 11 XL* sector funds from SPDR, allocating equal weighting to each. One will end up with one’s equities equal weighted by sector and with plenty of large cap exposure, as opposed to the pronounced mid-cap tilt found in whole market equal-weight strategies. Personally, I drop the financial sector entirely (Thomistic proh…
Earlier quoted context omitted.
It’s an interesting thought. The growth is so extreme that if the S&P 500 fell 50% today it would reach levels last seen in 2022. Given that the timespan is so short, I’m honestly not sure it would be as bad for 401ks as people expect unless all of your investment was concentrated in the last 4 years. I suppose it’s worse if your calculation is, “I’ll retire when my 401k hits $X absolute value,” but I think most peop…
One of the big issues with this is sequence of returns risk. If you retire and rely on your portfolio but the market dives for a year or two right after you leave the workforce, your total portfolio value is screwed because you were selling at a low point.
Earlier quoted context omitted.
These companies have valuations reflecting a debt light business. At a minimum, 420 billion in debt is enough to change the stock price by 10-20%. If the company plans to add another 400 billion in debt you need to give it the side eye. If 50 billion in revenue is from other companies debt spending… then You have a problem.
> These companies have valuations By the time we're reading headlines about this debt, it has been known to institutional investors for a long time. The debt is priced into the valuation.
Earlier quoted context omitted.
brother read those numbers out loud If I make $200k I do not have $400k off-balance gambling debt
This "debt" is almost solely rental style deals with datacenter constructors. If you make 200k and have a 400k mortgage youre doing just fine.
As long as this debt does not make it into life insurance and pension funds, we are fine. The trouble is that private credit is taking control of some life insurance companies and off-loads this debt to these. When these fail, it will become everyone's problem. > Risks to financial stability may also stem from entities with particularly high exposure to private credit markets, such as insurers influenced by private e…